FOREIGN corporations that sell digital services, such as Netflix, Spotify, and others will have to pay for and impose value added tax (VAT) on their services, the chairman of the House committee on ways and means said Wednesday.
In a virtual hearing Wednesday via Zoom application, Albay Rep. Joey Sarte Salceda, the panel chairman, said his panel has approved its committee report on a proposed law imposing VAT on goods and service providers above the P3 million VAT threshold.
“We imposed no new taxes. We’re simply clarifying that they should be VATed. In general, if you sell, you pay VAT, unless you fall under the exemptions for small businesses,” said Salceda, an economist.
Salceda said the committee “has kept its promise of imposing no new taxes, guaranteeing exemptions for small businesses, and closing loopholes for large foreign corporations.”
“We have now clarified that digital services and the goods and services traded through digital service providers should generally be subject to VAT. This is just a matter of common tax sense,” Salceda said, adding that “if brick and mortar establishments, which are the hardest-hit by the pandemic, have to pay VAT, the giants of e-commerce shouldn’t be exempt.”
Salceda said his committee has already studied the impact of the committee report on incomes.
“Seventy seven percent of the revenues will come from upper middle-income families and above. The effective income tax rate on the bottom 20% of the population is 0.01%, and that progresses, until 0.09% for the highest income classes. This is the mildest imposition you can make when the country is in severe need of new revenues. And it covers a mostly discretionary spending,” Salceda said.
Salceda added that only “0.04% of all revenues from this proposal will come from the bottom 20% of the population.”
“In other words, this will not be felt by the most vulnerable households, and will be felt only very mildly by the richest households, but it will certainly generate new revenues for our COVID response,” the tax panel chair added.
Exemptions on small businesses guaranteed, no to online barter taxes Meanwhile, Salceda also said that small businesses will continue to be
“If your sales are below P3 million, you are exempt from paying or filing VAT. If your net income as a sole proprietor is below 250,000, you are exempt from paying and filing income taxes. So, the small Facebook online seller will not be taxed. I guarantee you,” Salceda said.
Salceda also added that “the same exemptions apply for barter trading.” “You will remember that I struck down the discussion on taxing barter trades online. I assured you that it will not be done under my watch,” Salceda added.
“So, this committee report has nothing on online barter trades, and I will never touch it as chair of the tax committee,” Salceda said.